1. Technical Field
This disclosure relates to a system and method to avoid loan defaults and foreclosures. In particular, this disclosure relates to a system and method to forecast and prioritize loans that are at risk of default and/or foreclosure, develop and execute loss mitigation campaigns using distributed resources, and provide recommendations to borrowers to transform at risk loans into performing loans.
2. Background Information
Currently, the mortgage industry faces unprecedented challenges in an effort to address a historically high number of loan defaults and foreclosures. Currently the mortgage industry reports that many borrowers are in foreclosure proceedings and the borrowers have had no contact with their servicer. A sampling of current mortgage industry loan portfolios suggests that few of the borrowers have workout plans in progress. Programs were designed to keep many troubled homeowners in their homes, but typically few applications are received and the applications received failed to meet the programs guidelines and therefore were rejected. Millions of homeowners could end up defaulting on their mortgages in the near future. The pace of loan modifications is slow. Loan modifications may occur for a small percentage of seriously delinquent loans each month.
Mortgage default estimates are considerable in an economic climate of high and growing rates of default and foreclosure. Foreclosure cost estimates under such economic conditions are great. Many families typically lose their homes during such economic conditions. Recidivism rates for loan defaults and foreclosures rise. Regulatory mandates may be expected to force lenders and loan servicers to modify performing loans in order to assist borrowers under such economic conditions.
Bank and loan servicer financial impacts due to poorly serviced loans include: 1) Rise in mortgage default rate with many of the defaulting loans going to foreclosure, resulting in a unprecedented foreclosure rate across the industry; 2) expected re-default rate, in such economic climate, on modified mortgages (using existing processes and tools) has been more than a third of the defaults re-defaulting; and 3) the cost of a foreclosure to the bank, loan servicer and investor yield foreclosure related costs across the industry. Borrower and other consumers impacts due to poorly serviced loans include: 1) higher defaults on other accounts (e.g., credit cards, auto loans); and 2) loss of home equity through foreclosures and short sales.
Therefore, a need exists to address the problems noted above and other problems previously experienced.